A report into the deadly south-west Sydney hospital gas mix-up outlines recommendations including a performance watch for the health district after a "catastrophic error" left one baby dead and another with suspected brain damage.

An engineer at a Sydney hospital is stood down over an oxygen mix-up that left one baby dead and another with suspected brain damage, as NSW Health announce they will no longer use the company that installed the gas lines.

A newborn dies and another has suspected brain damage after nitrous oxide, also known as laughing gas, is incorrectly administered instead of oxygen at Bankstown-Lidcombe Hospital in Sydney's south-west.